Financially Distressed Health Care Entities Should Be Attentive to Medicare Provider Agreements Prior to Bankruptcy According to August ABI Journal Article
Alexandria, Va. — As many hospitals and health care facilities face increasing financial difficulties in the current economic climate, an article in the August edition of the ABI Journal cautions providers that participate in the federal Medicare program to have a plan for potential issues stemming from their Medicare provider agreements. “During the course of a health care provider bankruptcy, issues will arise related to its participation in the federal Medicare program, especially if the debtor seeks to assume and assign, or sell, its Medicare provider agreement to a third party,” Ted A. Berkowitz and Veronique A. Urban of Farrell Fritz PC (Uniondale, N.Y.) write in their article, “Intensive Care: Medicare Issues in Bankruptcies.” Health care providers participate in the Medicare program by entering into provider agreements with the Secretary of Health and Human Services (HHS). Pursuant to the agreement, health care entities agree to comply with all aspects of the Medicare statute, including the requirement that the entity charge Medicare patients only those fees that are authorized by the Medicare Act for the services that it provides to such patients. In return, the government agrees to reimburse the health care provider for its services to Medicare patients. A key question that often arises at the start of a health care bankruptcy proceeding is whether the government’s adjustment to a debtor’s reimbursement claims for pre-petition overpayments violates the automatic stay of the Bankruptcy Code, or whether such action constitutes a permissible recoupment that would not be in violation of established bankruptcy principles. Some courts have found that Medicare’s post-petition adjustments to overpayments received by the debtor pre-petition constitute a permissible recoupment and do not violate the automatic stay. Other courts, however, have ruled that the government’s withholding of the debtor’s post-petition reimbursements and application of such reimbursements to prepetition overpayments is in violation of the automatic stay. “Courts are still split in their analysis of whether such transactions arise out of a single contract or transaction, and future health care debtors should be mindful of the relevant authority in their particular jurisdictions,” Berkowitz and Urban write. “As courts continue to look to balance the rights of health care debtors and the government in bankruptcy proceedings, distressed health care entities seeking bankruptcy protection should endeavor to formulate a strategic plan prior to filing to deal with potential Medicare issues.” To obtain a copy of “Intensive Care: Medicare Issues in Bankruptcies” published in the August edition of the ABI Journal, please contact John Hartgen at 703-894-5935 or via email at [email protected] For additional information about health care or medical insolvencies, ABI’s bookstore has the recently released ABI Health Care Insolvency Manual, Third Edition, in stock. To order or find out more about the manual, please click here: http://bookstore.abi.org/abi-health-care-insolvency-manual-third-edition. ### ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes more than 13,000 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals, providing a forum for the exchange of ideas and information. For additional information on ABI, visit www.abiworld.org. For additional conference information, visit http://www.abiworld.org/conferences.html.
Thursday, August 2, 2012